Ch 5 3 -

Please fill in the blanks

Suppose Guatemala is open to free trade in the world market for oranges. Since Guatemala is small relative to the international market, the demand for and supply of oranges in Guatemala have no impact on the world price. The following graph shows the domestic market for oranges in Guatemala. The world price of a ton of oranges is PW = $350. On the following graph, use the green triangle ( triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free- trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). /\\ '81 710 - Domestic Demand Domestic Supply 570 -, h 630 -- CS E 3 a 550 " PS D. E g 510 - O Q u.| 470 W 9 D: 'l 430 ~ 390 W P 350 owAh 3m 0iiiiiiiiii 0 is 30 45 60 75 90 105 120 135 150 QUANTITY (Tons of oranges) Because Guatemala participates in international trade in the market for oranges, it will import tons of oranges. Now suppose the Guatemalan government decides to impose a tariff of $40 on each imported ton of oranges. Under the tariff, the price Guatemalan consumers pay for a ton of oranges becomes , and Guatemala will import tons of oranges